(Kitco News) - Gold has rallied solidly this week on the likelihood of low interest rates, but the gains seen are likely to be short-lived, said a New York-based commodities consultancy.

Members of the Federal Open Market Committee meeting said that the low interest rate environment in the U.S. will remain that way until 2014, confirming what investors expected, said CPM Group, leading to a rally in gold prices. Prices could still head higher over the next few days as futures contract prices are rolled to the next active contract month, they said, with a possibility of seeing prices topping out at $1,750 an ounce.

“The broad buying of the past few days suggests that investors are less concerned about some form of financial catastrophe than they have been over the past year, and appear to be focusing more on an extended period of modest real growth and low interest rates,” they said.

However, the consultancy said, the rally is likely to be short-lived, maintaining their view that gold prices will still decline over the next few quarters. “Beyond the start of February gold prices are expected to decline, possibly moving toward $1,700 over the first two weeks of the month,” they said, adding that prices should move between $1,500 and $1,760 through February.

They point out that open interest in the Comex gold futures has fallen over the past few days, suggesting short-covering – which is the buying back of previously sold positions to close a trade – drove prices higher.

In the physical market, they said the premiums on gold Eagles and gold Maple leaf coins have fallen, “suggesting that smaller investors have been selling gold coins back to dealers during this rally, more than buying new coins.”

Even though gold prices vaulted higher on the FOMC announcement, CPM Group said the statement “did not point toward any development not already largely expected by the market, therefore the temporary increase in asset prices resulting from yesterday’s meeting is not expected to provide a medium- to longer term springboard for prices,” they said.

Lastly, CPM Group said while the fundamentals for gold have not changed, these fundamentals are not likely to provide the same momentum and strength for prices as they did in the past few years. “CPM Group expects that the market largely will adjust to the new reality of slow economic growth going forward. This overall trend has been emerging over the past few months,” they said.